The UK’s inflation rate, as measured by the Consumer Prices Index, fell from 2.1% in November to 2% in December. This is the first time inflation has been at or below the government-set target since November 2009. However, inflation measured by the Retail Prices Index (RPI) rose to 2.7% from 2.6% in November.The Office for National Statistics (ONS) said the fall was most likely influenced by the slowdown in the increase of fruit and meat prices, as well as discounts offered by retailers in the run up to Christmas. The rise in prices of both food and non-alcoholic drinks for this period was the smallest it had been since 2006. However, increases in gas and electricity bills as well as petrol prices had an upward effect on inflation, the ONS said.Prime Minister David Cameron welcomed the return to the 2% inflation target. “It’s welcome news that inflation is down and on target. As the economy grows and jobs are created this means more security for hard-working people,”
he said.Labour’s Treasury spokeswoman Catherine McKinnell also welcomed the news however, highlighted that prices were still rising more than twice as fast as wages, and that the cost-of-living crisis will continue.Economists believe that the fall will ease pressure on the Bank of England to raise interest rates following the recent recovery in the economy. Chief economist at Markit, Chris Williamson, said “The easing in price pressures is a welcome relief to policy makers at the Bank of England and helps keep the spectre of higher interest rates at bay.”
Bank of England governor Mark Carney indicated that the Bank will not raise interest rates until unemployment falls below 7%.The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.Setfords Solicitors are a national full service law firm, with Banking & Asset Finance Solicitors in Reading and across the country.